Indonesia is ASEAN’s largest country and offers significant opportunities from both a production and consumption perspective. Its geographic structure presents some serious challenges though, which are reflected in a highly decentralised interpretation and implementation of customs and trade rules and regulations. Recent advancements in reducing corruption are having a substantial impact on customs and trade compliance management expectations by the authorities.
Indonesia has been hitting the international press headlines for one of the most active countries in resorting to alleged protectionism, through the introduction or strengthening of a number of non-tariff barriers. Frequent, quick and often unpredictable new rules pose unprecedented challenges for importers and exporters that require high levels of agility and knowledge.
Customs duties in Indonesia vary from 0% to 170%, although most imported items will attract duties in the range of 0% to 15%. Various customs facilities are available, including duty exemptions and preferential duties for most imported goods of ASEAN Origin. Therefore ASEAN origin certification is often critical.
Indonesia imposes import restrictions on certain products including alcoholic drinks, ammunition, and hazardous waste. A Special Importer Identification Number (NPIK) also needs to be obtained to import certain items, including textile products, shoes, and electronic goods. A specific challenge in Indonesia is the requirement to establish separate legal entities for the import for manufacturing or trading purposes respectively.
The Directorate General of Customs and Excise is responsible for enforcing customs and related laws, and for collecting customs duties and other taxes on imported goods.
Companies often regard Customs matters as low-key management issues, with little or no monitoring being conducted until significant liabilities have accumulated. Duty and tax liabilities can build up alarmingly quickly, with significant additional exposure to administrative penalties of up to 500%.
In addition, we forecast more aggressive and better targeted Customs audits (sometimes in the form of joint audits with Tax authorities) as part of concerted action by the Indonesian Government to increase revenues. Larger companies, and especially multi-national corporations, are at particular risk of such increased Customs scrutiny.